Yahoo Finance Should Value Investors Buy KB Home (KBH) Stock?
Here at Zacks, we focus on our proven ranking system, which places an emphasis on earnings estimates and estimate revisions, to find winning stocks. But we also understand that investors develop their own strategies, so we are constantly looking at the latest trends in value, growth, and momentum to find strong companies for our readers.
Looking at the history of these trends, perhaps none is more beloved than value investing. This strategy simply looks to identify companies that are being undervalued by the broader market. Value investors rely on traditional forms of analysis on key valuation metrics to find stocks that they believe are undervalued, leaving room for profits.
Luckily, Zacks has developed its own Style Scores system in an effort to find stocks with specific traits. Value investors will be interested in the system's "Value" category. Stocks with both "A" grades in the Value category and high Zacks Ranks are among the strongest value stocks on the market right now.
One stock to keep an eye on is KB Home (KBH). KBH is currently sporting a Zacks Rank of #2 (Buy) and an A for Value. The stock has a Forward P/E ratio of 7.81. This compares to its industry's average Forward P/E of 10.41. Over the past year, KBH's Forward P/E has been as high as 9.71 and as low as 2.44, with a median of 3.64.
Another notable valuation metric for KBH is its P/B ratio of 0.95. Investors use the P/B ratio to look at a stock's market value versus its book value, which is defined as total assets minus total liabilities. This stock's P/B looks attractive against its industry's average P/B of 1.29. Over the past 12 months, KBH's P/B has been as high as 1.01 and as low as 0.63, with a median of 0.80.
Value investors also frequently use the P/S ratio. This metric is found by dividing a stock's price with the company's revenue. Some people prefer this metric because sales are harder to manipulate on an income statement. This means it could be a truer performance indicator. KBH has a P/S ratio of 0.52. This compares to its industry's average P/S of 0.66.
Finally, we should also recognize that KBH has a P/CF ratio of 4.32. This data point considers a firm's operating cash flow and is frequently used to find companies that are undervalued when considering their solid cash outlook. This stock's P/CF looks attractive against its industry's average P/CF of 5.71. Over the past 52 weeks, KBH's P/CF has been as high as 5.13 and as low as 2.80, with a median of 3.66.
Another great Building Products - Home Builders stock you could consider is Taylor Morrison Home (TMHC), which is a # 2 (Buy) stock with a Value Score of A.
Taylor Morrison Home sports a P/B ratio of 0.98 as well; this compares to its industry's price-to-book ratio of 1.29. In the past 52 weeks, TMHC's P/B has been as high as 0.98, as low as 0.57, with a median of 0.75.
These figures are just a handful of the metrics value investors tend to look at, but they help show that KB Home and Taylor Morrison Home are likely being undervalued right now. Considering this, as well as the strength of its earnings outlook, KBH and TMHC feels like a great value stock at the moment.
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KB Home (KBH) : Free Stock Analysis Report
Taylor Morrison Home Corporation (TMHC) : Free Stock Analysis Report
